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While you were sleeping: BusinessWire overnight wrap

Thursday 13th November 2008

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Stocks on Wall Street tumbled after the US Treasury backed off from a plan to use half of the US$700 billion financial aid program to buy toxic mortgage assets.

The funds will now be used to meet the capital needs of non-bank financial institutions, according to Treasury Secretary Henry Paulson. Stocks also fell after Best Buy, the largest chain of electronics stores in the US, cut its profit forecast, saying it faced "the most difficult we've ever seen."

Best Buy rival Circuit City Stores filed for bankruptcy protection this week and department store chain Macy's also lowered in profit outlook.

American Express dropped 9.9% to US$20.18 on concern it may need government financial assistance. The Dow Jones Industrial Average fell 4.2% to 8331.16 and the Standard & Poor's 500 Index slid 4.6% to 857.36. The Nasdaq Composite fell 4.6% to 1508.39.

General Motors snapped its decline, gaining 4.5% to US$3.05 on optimism the auto industry will be the recipient of government financial help. GM had said it was burning through cash at a fast enough rate to exhaust its accounts, raising the spectre of a collapse.

GM, Ford and Chrysler stand to receive US$25 billion in extra assistance under a proposal from House Financial Services Committee Chairman Barney Frank. A hearing is planned for Nov. 19 to consider legislation needed to enact his proposal.

Paulson said the remaining half of the so-called TARP funds will be used to help lift the availability of consumer credit. Lack of available loans for consumers "is creating a heavy burden on the American people and reducing the number of jobs in our economy," he said in Washington.

The move helped lift the yen versus the US dollar and the euro, spurring investors to exit higher-yielding assets funded with loans in Japan's currency.

The yen strengthened to 95.44 per dollar in New York, from 97.65. It gained to 119.39 per euro from 122.27. The euro fell to $1.2512 from $1.2522.

The pound fell to a record low against the euro on the prospects of a recession in the UK.

US Treasury bonds rallied as the slump in stocks boosted demand for the fixed payments from government debt. The yield on two-year notes fell 5 basis points to 1.2% and earlier touched a five-year low 1.18%. The 10-year bonds fell 8 basis points to 3.67%.

European government bonds also advanced, as a report showed a slide in the region's industrial output, stocks retreated and traders increased bets the European Central Bank will lower interest rates again.

German two-year notes fell 8 basis points to 2.27%. The 10-year bund fell 4 basis points to 3.63%.

In Europe, Swiss Life cut its dividend, warning that profit would miss its target, sending its stock down 18%. It also halted a share buyback. Dutch financial group ING posted a quarterly loss on impairments on stocks and bonds holdings, counter-party losses and property writedowns. ING dropped 3.6%.

A deteriorating profit outlook drove European stocks lower for a second day while declining prices for commodities weighed on oil producers and mining companies. Credit Suisse and Deutsche Bank led a decline in financial shares on Paulson's decision to abandon plans to buy toxic mortgage debt.

BHP Billiton, the world's biggest mining company, fell 6.9% and ArcelorMittal fell 9.6% after Citigroup said in a report that the steelmaker will be hit with slowing demand and rising debt.

The Dow Jones Stoxx 600 index fell 3.2% to 205.33, extending this year's losses to 44 percent. The FTSE 100 Index fell 1.5% to 4182.02, with declines by Man Group, Prudential and Thomas Cook Group of around 10% or more.

Germany's DAX 30 fell about 3% to 4620.8 and France's CAC 40 dropped 3.1% to 3233.96.

Crude oil fell to the lowest level since January 2007 amid expectations the International Energy Agency will cut its estimate for global demand next year, while US stockspiles of fuel may be rising.

Crude oil for December delivery fell 5.2% to US$56.24 a barrel on the New York Mercantile Exchange and earlier reached US$55.94. Gold for immediate delivery fell 0.5% to US$728.25 an ounce.

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